Electricity tariff is fair, reasonable – NERC

The Nigerian Electricity Regulatory Commission (NERC) Monday asked the Nigeria Labour Congress (NLC) to substantiate its claims of arbitrary increase in electricity tariff as well as its accusation of the commission for including fixed charges as a component in the new electricity tariff.

NERC, which responded to comments attributed to the President of NLC, Abdulwaheed Omar, in which he chastised the commission for increasing electricity tariff without commensurate improvement in supply, stated that the new tariff as contained in the Multi Year Tariff Order (MYTO-2) was fair, reasonable and necessary to guarantee continuous improvement in electricity supply to Nigerians.

Chairman of NERC, Dr. Sam Amadi, said at a joint media briefing with it s Commissioner for Market Competition and Rates, Eyo Ekpo, in Abuja, that the regulatory agency had initiated MYTO-2 with cautious and wide-reaching consultation with extant socio-economic stakeholders, including the NLC.

Amadi who questioned NLC’s rationale for picking on the tariff, explained that MYTO-2 was designed and executed with utmost accountability and full participation of relevant stakeholders through several public hearings and consultations across major Nigerian cities to afford inclusive participation in the tariff setting process.

He noted that a comprehensive consultation on the tariff was initiated with the leadership of NLC in Jos, Plateau State, wondering why the union would turn back to accuse it of unwholesome practice in administering the tariff framework across board.

Amadi said: “As a responsible regulator, we are committed to respond to the concerns raised by consumers in print and electronic media and through social media. We consider it of utmost importance to always explain to the consumers that the tariffs they pay are fair, reasonable and necessary to guarantee continuous improvement in electricity supply to Nigerian homes and businesses.

“NERC wants to make it clear that since 1st June, 2012 when the second edition of MYTO came into force, it has conducted two minor reviews which were published as required by law.”

“A minor review under MYTO involves an examination of interest rates, exchange rates, inflation rates and available generation capacity during the preceding six months and if these report a change of plus or minus five per cent individually, such change will be applied to the tariff published for each distribution company.

The two reviews did not result in any increase of tariff because the indices and fundamentals of the MYTO have not significantly changed. The changes that some customers have belatedly noticed in their bills were announced by the commission on June 1, 2012; it is not true that the tariff was designed to suit investors alone, the NLC in any way participated alongside several civil societies organisation in the tariff consultation,” he added.

In his justification of the fixed charge component in the tariff, Amadi explained that the fixed charge, is a component of electricity tariff all over the world and is charged to recover some of the capital costs for producing and supplying electricity.
“In designing the fixed charge, NERC ensured that very poor consumers on R1 are not charged fixed charges and that most of the residential consumers are subsidised. The fact is that the current N700 fixed charge for R2 customers actually recovers only a small fraction of the actual fixed cost of supply. So, it is not right to say that there is arbitrary increase, the tariff is in line with the laws,” he said.

The commission however asked the NLC to petition it on observed anomalies with its administration of the tariff rather than making blanket accusations, adding that all stakeholders must work to ensure the success of reforms in the power sector.

On the reported skewed commitment of distribution companies to live up to their obligations in the tariff framework, Amadi stated: “We regret that the distribution companies have not been very committed to meeting their obligations in the MYTO.

“NERC recognises that the quality of service has not seen significant improvement especially in the area of metering and accurate billing of customers. We have responded with regulations to enforce correct billing of unmetered customers and the new CAPMI metering policy.”